IndiGo IPO update; JAL bonds are coming back; Akbar Al Baker’s pre-airshow threat to manufacturer

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By admin July 4, 2014 18:31

IndiGo IPO update; JAL bonds are coming back; Akbar Al Baker’s pre-airshow threat to manufacturer

IndiGo finance managers are conducting the final round of meetings with banks in Paris this month to decide which will become the underwriters of the US$400m IPO of the airline. As mentioned here previously, the IPO should launch around September time. The mantra for this IPO is very simple indeed: if IndiGo can turn a profit in the Indian market over the past few years, as it has done, then just think about what it could achieve if regulations were even slightly relaxed and ATF taxes cut. There is no question that IndiGo is a fabulous airline.  However, it remains to be seen what effect Air Asia India and SIA-Tata will have on IndiGo margins and this could yet play a part in the story of any IPO.

Of course Qatar Airways wants to buy into IndiGo. It is going to get its chance, and in the process most likely ensure that the price it at the higher end of the target range.

That brings us nicely to Qatar CEO, Akbar Al Baker, who this week stated that unless he gets more EU slots “we will stop buying European aircraft”. Well you can imagine that this has gone down like a ton of bricks across the EU with cries of “Who do they think they are?” ringing out. The real crux of this story may well lay in the fact that a) Al Baker is wondering if an A350 order is the right way to go if an A330Neo is about to be launched; and b) he is no doubt slightly, shall we say, upset…that his A380 launch has been postponed yet again, this time until September 1, 2014. Airbus will be hoping that he cannot make it to Farnborough.

Meanwhile, to the consternation of ANA no doubt, Japan Airlines is preparing to seek a credit rating that will enable it to sell corporate bonds for the first time since the government bailout. To pave the way, the airline will look to raise the current dividend ratio from 20% of net income, minus deferred taxes. This is just as well because Japan Airlines is spending around US$1bn on aircraft deliveries over the next year or so and as such it needs to widen its financing options at speed; then there are the A350 deliveries behind this batch starting in 2019. Additionally there is the very real fact that there is not long to go before Japan Airlines must start to pay corporation tax once again.

Japan Airlines was up 2% at the close today and is up 10% on the year so far against a 5.2% decline of the Nikkei.

admin
By admin July 4, 2014 18:31
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